patrick.net

Over the long term, it isn't possible for house prices to rise any faster in REAL (i.e. inflation-adjusted) terms than peoples' REAL incomes. Am I right? Even if you have a highly desirable area (say a waterfront), prices there can't rise any faster than the average ability to pay. Even billionaires don't have unlimited resources. Indeed, it was arguably the desirable areas (coastal CA and FL) which saw the biggest bubble.

The whole notion that a house can produce wealth is bunk. A house is a consumer good that slowly depreciates and needs constant maintainence (not to mention insurance and property taxes). Factories, refineries, farms, and working businesses produce wealth...not houses.

Unfortunately over the last two decades we've sent much of the wealth-producing sector overseas. It seems our economy is now based on little more than speculation and gambling, er...I mean..."finance."

I believe we are headed for serious deflation in the short term and than even more serious inflation in the long term. Prices could actually be much much higher nominally in 2020 - 2025, but much lower after adjusted for inflation. The key is, when will we switch from deflation to inflation ? If we continue our present course of keeping zombie banks on life support, while the housing market slowly deflates, at the present rate, it should be around 2017-2018. Keep your eye on precious metals, especially gold and silver and their historical relationship to the dow. IMHO once that trend reverses, it's time to pull the trigger on RE and buy. By 2020-2025 the % of those buying houses will be less than those renting.

www.westsideremeltdown.blogspot.com

www.santamonicameltdownthe90402.blogspot.com

No one has offered me even a measly million.

Irish songs are made up of HAPPY WARS and SAD LOVE AFFAIRS. Most people turn away from the painful truth(s). Fight the good fight any way Patrick.

Patrick says:
'Hmmm, something must be wrong in my calculations. No one has offered me even a measly million. In fact, no one has offered anything.' Isn't it interesting how there's so little market for reality? Maybe it's the format. Try turning it into a 'show'.

In 2020 what will have happened will seem obvious, everyone will be able to look back and explain exactly why it happened that way.

You know what we'll call it ?

2020 hindsight.

Los Angeles Renter says

FortWayne says

And tulips haven't risen in price either if you know what I'm referring to.

Big difference between HOUSES and TULIPS.. you can't live and raise a family in a tulip!

Comparing the housing bubble to the tulip bubble is a little ridiculous.

Comparison lies in underlying value. Everything comes back to what it's worth on the free market. Building a box with a door isn't exactly rocket science, just like growing a tulip.

Nope it is not rocket science....You can use the innate desire most humans have for a safe space, their creativity. their territoriality, and competitive nature, to take advantage of them. But first you must get them to let you counterfeit the legal tender. Of course you don't have to take advantage..but if that's YOUR nature....

Los Angeles Renter says

Big difference between HOUSES and TULIPS.. you can't live and raise a family in a tulip!

Comparing the housing bubble to the tulip bubble is a little ridiculous.

You're analysis would be correct if people only bought houses with the intent to live in them. In Florida, most of the speculators didn't live in Florida. Many of them didn't even live in North America.

Even now as knife catchers hope for a rebound, most of the speculators do not live in Florida. People were buying houses with no intent to live in them or even see the houses. They just wanted to flip.

In this respect, the housing bubble was very much like the tulip bubble.

TMAC54 says

Can anybody name ANY invention that generated ONE TENTH of the revenue that the computer did ?

Uh...the wheel.

swebb says

thomas.wong1986 says
you pay to live near polution free air, better weather, better 4 year schools, better shopping centers, resturants, intellectually smarter nieghbors, and all the other marketing gimicks the REA can come up with.

I don't get the gimmick part. Those are all things that have value to some people, so why wouldn't they pay more to get them?

No one in the past over paid. Condos in SF near SOMO lets say were equally priced to condos in southbay. The most expensive homes in my town of LG were far away from everything. Up on the hills.

shrekgrinch says

We know now...one big fat UNCONSTITUTIONAL

I've already shown on multiple threads that you don't know anything about constitutional law. Let's not rehash that in the RE forum.

No one has offered me even a measly million. In fact, no one has offered anything.

You could always sell out and put AdSense revenue all over these forums.

thomas.wong1986 says

Paying an inflated prices for 5% revalues the other 95%. This is what actual happened over the past 5-6 years.

I don't disagree with this. It's sort of true -- even Goldman's stake was fairly small for large $$$ (of course, they'll get a nice piece of that back).

toothfairy says

just a guess based it on the last housing crash that ended in 94. 10 years later in 2004 prices had more than doubled.

The last housing bust ended more like 1996/1997. Still had crazy prices 10 years later, but due to two consecutive bubbles. That's not really a great example.

However, you're more likely to be accurate than my friend who in the opening months of the bust thought prices would zoom off into the stratosphere again 6 months later after this "brief pause." The bulk of the losses that friend saw were likely after that prediction, and they were substantial.

shrekgrinch says

When Facebook gets its $100 billion (and it will get it), it will have a war chest to go shopping for smaller startups that will make Google look like a lightweight in comparison.

Actually, I doubt Facebook will get anywhere near $100B in *cash*. If you look carefully at Pandora, you'll see that their market cap at IPO was $2.6B, but they received less than 1/10 of that in cash for the IPO because they were only offering a limited number of new shares.

shrekgrinch says

Thanks to SoX, most won't but instead will get bought.

That's really more of a talking point. If you look at IPOs per year, it has had a much smaller effect than the talking points say. The downturn in the economy has had far worse an effect on IPOs. Just compare 2004-2006 to the dotcom years when things were far frothier.

corntrollio says

You could always sell out and put AdSense revenue all over these forums.

I did try putting AdSense ads in the header of every page, but less than one click per 10,000 page views. Truly abysmal revenue, like $3/day.

Makes me wonder if Google really has the revenue it says it does.

Anyway, it's still a lot of fun fighting the debt-mongers.

commonsense says

Yes, 1973 was way better to me.

Then you must not be one of the persons who's got some liberation since then.

Dan8267 says

A better model would be a Logistic Growth Curve. The value of a network or website at first increases exponentially, but then value/growth slows down as it reaches a horizontal asymptote at 100% of the population.

Of course, one Apocalypsefuck is worth a thousand regular viewers.

So then the question is how to draw in more viewers. Maybe some better invitation system, where current users get credit by inviting outsiders to join?

Apocalypsefuck's comments make it all worthwhile even without getting paid.

If you add patrick.net to google plus, I'll share it with others. Maybe others would do the same.

After all this site provides a great benefit to it's readers through information which otherwise isn't available. This site saved me quite a lot of money and headaches.

So then the question is how to draw in more viewers.

Join Phils Gang .com ?

Are you familiar with Phil Grandy ? He Has a radio talk show at noon on 1220 am. His moniker is the guy who tells the public what Wall Street and the Government DON'T want you to know.
I truly believe he would mention this site on his talk show.

St Patrick won't work, Atheists also want the truth.

Or advertize on porn sites. You could aks "Wanna get screwed" ? Maybe offer real estate courses online ?

So then the question is how to draw in more viewers. Maybe some better invitation system, where current users get credit by inviting outsiders to join?

That's essentially what a multilevel marketing company does: crowd-sources recruitment in a pyramid pattern.

Another technique to draw in customers is to add a little nudity to the site. That always seems to work.

But the best way, of course, is to maximize your page rank for relevant terms. Patrick.net is currently the fourth Google result for "housing bubble". However, fewer people are searching for "housing bubble" these days according to Google Trends.

So my advice would be to seek out which terms are currently popular with buyers, sellers, and renters and try to maximize your page rank on those terms. How to do this is outside of my areas of expertise. I do know that having SEO-friendly URLs helps a lot though.

Funny thing about the above graph, I just noticed... The popular news only started reporting about the housing bubble a year after it bursts and long after people stop searching for "housing bubble". That seems to say something important.

FortWayne says

Comparison lies in underlying value. Everything comes back to what it's worth on the free market. Building a box with a door isn't exactly rocket science, just like growing a tulip.

You can't build the land under the box...

OK, porn and Google +1.

Porn would probably get me banned in many ways.

I added the +1 button below and left, though I'm sure that's not the optimal position. Things already seem to cluttered to me, so I'm not sure where to put it up on top. And on top, the Facebook button at least was delaying the rendering of the page sometimes. So I had to move it lower.

Los Angeles Renter says

You can't build the land under the box...

But the population can desert the land and leave....

bubblesitter says

But the population can desert the land and leave....

And wherever they leave to will be the next bubble... finite space.. and finite job centers. Even with advances in telecommuting... More people are going to need to work in big cities... And those big cities real estate markets are always going to be higher than rural areas.

Bellingham Bob says

What about oil? $15 gas is entirely possible.

Then All bets will be off, and it will be suck bark for the piss ants, and house prices wont matter any how. because milk will be $20 more like $25 a gallon. When will you schmucks learn energy is the single biggest economic barometer in any economy.

$15 a gallon gas need $30 minimum wage to support. I don't see that happening, before 2070.

Minimum Wage:
1982 $3.35 2010–2011 $7.25

You need to make at least two gallons of gas an hour.
in the last 30 years minimum wage has only doubled. So it would take another 30 years to get to $14 an hour then an other 30 years to get to $28 an hour minimum wage.
So not even in 60 years will we be able to afford $15 a gallon gas.

$15 a gallon gas makes 75% of this country live in poor squalid conditions like Brazil slums for the upper crust poor, and Calcutta slums for the less well off poor right here in America.
In our current dollars.

Oh silly me what with peak Oil and all.

Oh well there's always $20,000 600 watt solar energy.

Los Angeles Renter says

You can't build the land under the box...

Yeah, but you can use the land better by making a bigger and taller box. There are many many ways to increase land efficiently -- Tokyoization is just one of them. As an example, there is a lot of land in the Bay Area. It's just that some of it is preserved as "open space." We make incredibly poor use of the land here, and while I certainly do more than my share of hiking here, it's clear that much of this open space is not very well-used.

The Bay Area is simply no longer the grand attraction it was during the early days of computer tech and recent related BS hype. There are plenty of other places to work, do business and live (yes, as in buy a house for what a property is really worth and live in yourself.)

House prices 2020-2025 IMHO? Consider in my view the state of the economy here and aboard, and the US ability to handle things based on past experiences I say the average LA 3bed typical cheap mass build I see well-around $150K

IMHO the past lunacy is not an example of appreciation it was simply a carnaval-like magic trick. Value and tricks are two entirely different things and again a house is to be lived in not made money off of it is NOT an ATM (as far too many clearly did not understand previously.)

corntrollio says

In addition, there seem to be a large number of people who speak without knowing anything about Obamacare, as they do for many other topics, and these people largely focus quite transparently on talking points, rather than referring to specific aspects of the legislation. I seem to remember user saying "we don't know what's in ObamaCare" which was particularly unsophisticated because the law has been published for a quite a while now and this was a very old talking point.

Since it is based on romneycare I guess I can chime in.

If the only objective was to "claim" that more people have health care insurance then I guess it works. If the objective was to lower the number of people that use ER's as primary care then I guess it works.

If it is to make people healthier or improve productivity and quality of life then it fails.

If you don't make income then the penalty does not apply and therefore there is no incentive to buy it (at least from the governmental perspective)

We've been a tad brainwashed in thinking that medical insurance = health care or the quality of someones health. That's highly misleading at best.

You can have the best health plan in the world but if you smoke, eat all the time, live next to toxic emissions and drink alot then you really aren't healthy. Now if you have no insurance, hit the gym a few times a week, don't smoke, hardly drink and do yoga then you are probably in better shape than the other guy.

The problem isn't so much the mandate but rather the subsidized pool. If you can get something for free why bother paying money for it? Meanwhile how good can government care be given how good public housing is? If you don't pay money for something you have no ethical right to complain and the act of malpractice is not fully addressed.

That and it appears that next year a ballot initiative (we have them in mass too just like in CA) to remove the mandate. Romney is totally screwed if this passes. He'll look like John Kerry explaining his votes on iraq...

mdovell says

Now if you have no insurance, hit the gym a few times a week, don't smoke, hardly drink and do yoga then you are probably in better shape than the other guy.

I'm going to have to assume you are pretty young. Being healthy doesn't mean you won't need health care, it means you MIGHT not need as much health care as soon. Very healthy people still get things like cancer and heart attacks. If they are uninsured then everyone else picks up the tab.

mdovell says

The problem isn't so much the mandate but rather the subsidized pool. If you can get something for free why bother paying money for it?

I don't agree with Obamacare but I didn't see the free part. If you don't have health care then you will have to buy it. If you are poor you will be subsidized on a sliding scale. Where is the free part?

mdovell says

Meanwhile how good can government care be given how good public housing is?

Something like 40 countries have "government" care, most with as good or better results as the US. At half the cost on average. Please explain the advantages to the US system as it exists now.

Obamacare is a flop. The lobbiests wrote it. Anything worth while (meaning anything that saved any money at the expense of profits to the corporate players in the health care industry) got taken out.

bob2356 says

If you don't have health care then you will have to buy it.

It is my understanding you can reject it entirely if it is against your religious principles. SO factor that into the equation along with the welfare recipients and you add up one hell of a price tag to the public.

Too many variables.

How soon will government support go away? (can't be sustained)
Will the interest rates rise? (can't be kept low forever)
Economy is collapsing, how bad?

The only certainty there is is that taxes will go up.

I'll take a stab in the dark and say the US median home price will be $195k in 9 years, 2020.

There aren't enough working adults to soak up all the boomer's homes, especially since many of them will have depressed incomes for life.

Studies show that people who graduate in a recession, or those who remain unemployed or underemployed for long periods of time, make less money over their lifetimes than those who get careers out of college, or manage to avoid long periods of un/underemployment. The earlier the underemployment begins, the bigger the lifetime income gap.

(There are many guesses as to why: People who have been underemployed or unemployed begin to value security over compensation; employers are suspicious of underemployed people, thinking they are less competent and are less comfortable promoting them, etc.)

This means less $$$ to buy homes with, even if the economy improves.

Again, this is a guess, not something I think is written in stone. There could be inflation...

Los Angeles Renter says

What new policies, changes in tax system, green energy industrial revolution can jumpstart the economy... ?

Yeah like solyndra?

The only thing that could jump start the economy, is for the Government to throw large corporations out of the nest and let them fend for them selves. Reinstate most of the industry and financial regulations that have been excised from the way business is done.

Build a culture of due diligence, competence, and tenacious accountable inspectors in every regulatory sector.
Then get back to lending to small businesses that have passed a rigorous assessment process of their business model, and will be on the hook to pay back even if the business fails.

We need new business to get out of this, McDonalds makes burgers, that's it. Our government seems to be under the impression that they would make Auto manufacturers if McDonalds took the notion to do so. While thinking Joe Blow isn't capable of finding their way out of a wet paper bag.

We couldn't have a Thomas Edison today.

interesting chart here you can extrapolate to 2025

http://www.ritholtz.com/blog/2011/03/comparing-housing-prices-real-vs-nominal-1890-2011/

Bellingham Bob says

But what might also happen is the money supply expanding such that prices get another 0, along with everyone's incomes. That would solve some problems, and of course make buying a house now a screaming deal.

The Fed will only allow deflation to progress so far until they put the printing presses in full production mode. Personally, I think we are actually living in the maxed out tolerable deflation period. I suspect that this mild/moderate deflation phase, absent of any major catastrophe that further accelerates deflation, will last 3-5 more years. (Lock in any mortgage debt in the next 2-4 years at a super low 30 year fixed). After that, I fully expect a complete reversal of deflation. First mild, then like a speed car. Yes, a zero will be added to everything. Those caught on the sidelines with all cash holdings will be creamed.

I should further add that both sides of the aisle will jump to the conclusion that printing more money is the only way out of the debt spiral that both have created. Baby boomers will not tolerate any meaningful cuts in SS and Medicare, and the last major chunk of monetary outlay, the industrial military complex, beholden to many, especially on the right is also not going to be cut. So with these big three programs charging ahead in larger and larger outlays (the first two being semi pay as you go via payroll deductions, the third, not being paid for by anyone) you will have majority consensus that the only way to continue is to print more money and accept the fall out from rapid inflation. It will get the government off the hook for its debt but obviously will hurt many as well. Run away deflation on the other hand, will wipe out everyone, thus inflation will become the less evil choice.

NO GUESSING ! Housing prices WILL be 2.5 times that particular areas median income.
Setting aside unexpected change or new invention, like maybe "DIGITIZED GOVERNMENT" or hydrogen replacing fossil energy sources, etc.
This chart may help splain what happened to cause our Real Estate Bubble.
LUCY can you splain to me the GAP about '92 and the screaming ascent during the '82 recession ?

Buster says

Run away deflation on the other hand, will wipe out everyone,

I don't see that.

If you have cash, deflation is wonderful.